VZCZCXRO0258
OO RUEHCHI RUEHDT RUEHHM RUEHNH
DE RUEHKL #0061/01 0281107
ZNY CCCCC ZZH
O 281107Z JAN 10
FM AMEMBASSY KUALA LUMPUR
TO RUEHC/SECSTATE WASHDC IMMEDIATE 3736
INFO RUCNASE/ASEAN MEMBER COLLECTIVE PRIORITY

C O N F I D E N T I A L SECTION 01 OF 03 KUALA LUMPUR 000061 
 
SIPDIS 
 
DEPT PASS TO USTR: AMBASSADOR MARANTIS 
 
E.O. 12958: DECL: 01/28/2020 
TAGS: ECON ETRD PROG PREL MY
SUBJECT: SCENESETTER FOR VISIT TO MALAYSIA BY DEPUTY U.S. 
TRADE REPRESENTATIVE AMBASSADOR MARANTIS 
 
Classified By: Classified by Deputy Chief of Mission Robert G. Rapson f 
or reason 1.4 (b and d) 
 
Summary and Introduction 
------------------------ 
 
¶1. (C) Ambassador Marantis, Embassy Kuala Lumpur warmly 
welcomes your visit to Malaysia, which comes at a moment of 
opportunity in U.S.-Malaysia relations.  In his nine months 
in office, Prime Minister Najib Tun Razak has demonstrated a 
more pragmatic and action-oriented approach than his 
predecessor and he appears to be more inclined to move 
Malaysia at least some distance toward the international 
mainstream on issues of importance to the United States.  In 
this context, our efforts are focused on expanding the trade 
and investment dimensions of our ties, continuing our good 
security cooperation with Malaysia, and deepening our 
partnership on key global issues, including Malaysia's 
diplomacy towards Iran and Afghanistan. Robust trade and 
investment ties remain the solid foundation of our 
relationship with Malaysia, our 18th largest trading partner. 
 Malaysia is studying the Trans Pacific Partnership 
Initiative, but has given no indication yet as to whether or 
not it will seek to participate. 
 
¶2.  (SBU) During your visit, we suggest you focus on the 
following themes and objectives with your  Malaysian 
counterparts: 
-- Reiterate the USG,s commitment to economic growth through 
trade liberalization; 
-- Highlight the priority the Administration is giving to the 
Trans Pacific 
Partnership initiative, and the role that the TPP will play 
in promoting economic competitiveness and trade opportunities 
in the region; 
-- Encourage Malaysia, when it's ready, to engage TPP members 
about process and requirements for joining. 
End Summary and Introduction. 
 
 
The Broader Relationship in Context 
----------------------------------- 
 
¶3. (SBU) Robust trade and investment ties remain the solid 
foundation of our relationship with Malaysia, our 18th 
largest trading partner (bilateral trade totaled USD 44 
billion in 2008).  The GOM has been an important partner on 
counterterrorism when it serves Malaysia's own security 
interests, and we enjoy expanding law enforcement cooperation 
as well as evolving military-to-military ties.  Mil-mil 
engagement continues to expand in frequency and quality, as 
is evidenced by the increase in ship visits over the last 
four years, from approximately six per year to over 27 in 
¶2009.  Malaysia already hosts a regional Humanitarian 
Assistance / Disaster Relief (HA/DR), and we have been 
working to improve our disaster relief cooperation. Our 
people-to-people ties build on decades of Malaysian students 
studying in America (5,400 Malaysian students studied in the 
U.S. during in 2007-2008).  On the environmental front, we 
anticipate that Malaysia will eventually support the 
Copenhagen accord.  The emergence of new administrations in 
both our countries has provided expanded opportunities to 
pursue vigorous public outreach to often-skeptical, but now 
more receptive, Muslim Malay audiences. 
 
Najib and His Cabinet Seek Better U.S.-Malaysia Ties 
--------------------------------------------- ------- 
 
¶4. (C) PM Najib has a more nuanced sense than his 
predecessor, Abdullah Badawi, of international politics as 
well as Malaysia's place in the region and the world.   Najib 
places a priority on foreign relations beyond  Malaysia's 
traditional reference points of the Non-Aligned  Movement 
(NAM) and the Organization of the Islamic  Conference (OIC). 
Although it would be inapt to describe  Najib as pro-Western, 
the UK-educated Prime Minister  recognizes the benefits to 
Malaysia of engaging the U.S.,  sustaining access to our 
market and U.S. investment, along  with rapidly developing 
ties to China and India, and of  participating in 
international institutions.  He has given  explicit 
instruction to his cabinet to improve relations  with the 
U.S.  Over the past year, and with the advent of  the new 
U.S. administration, we have seen an uptick in the  tempo of 
our senior-level bilateral interactions, to  include the 
President's extended phone conversation with  Najib in June, 
Foreign Minister Anifah's meeting with  Secretary Clinton in 
DC in May, Deputy Secretary  Steinberg's visit to Kuala 
Lumpur in September, and Special  Advisor Einhorn's visit in 
October. 
The Economy and Trade Relations with the U.S. 
 
KUALA LUMP 00000061  002 OF 003 
 
 
--------------------------------------------- 
 
¶5. (SBU) The global recession led to dramatic declines in 
exports and investment in 2009 in Malaysia.  Malaysia's 
economy was estimated to have contracted by three percent in 
2009 and is expected recover slowly in 2010.  Hence, the 
political stakes are high for Najib, who must ensure that the 
economy continues to provide growth and prosperity to a large 
middle class.  Najib has used the recession to push forward 
some economic reforms designed to improve Malaysia,s 
competitiveness and Najib recognizes that more reforms are 
needed.  This potentially presents opportunities for our 
trade and investment agenda specifically with regard to 
market access issues related to government procurement and 
competition policy, among others. 
 
¶6. (SBU) While it is not yet ready to join, Malaysia is 
interested in discussions related to the Trans-Pacific 
Partnership regional trade agreement.  If it decided to join, 
it could make use of much of the work done during the 
U.S.-Malaysia Free Trade Agreement negotiations. In a meeting 
on November 17, Ministry of International Trade and Industry 
(MITI) Secretary General Rahman told visiting AUSTR Weisel 
that the Government of Malaysia understood that the U.S. 
would be shifting its emphasis from bilateral to regional 
trade negotiations.  Rahman noted that MITI had been 
preparing a paper to present to Cabinet seeking a mandate on 
key outstanding issues related to concluding the bilateral 
FTA and would now revise that paper to also raise questions 
related to participation in the TPP.  While Malaysia had not 
yet considered seriously whether it would be interested in 
joining the TPP, Rahman said he believed, given the U.S. 
shift to a regional focus and the participation of countries 
such as Vietnam, Malaysia needed to consider this course. 
MITI contacts told Embassy officials that intergovernment 
deliberations are ongoing, and that while the number of 
ministries opposing TPP is small, some of them are very vocal 
in their concerns. 
 
Competition Policy and IPR Reforms Coming Soon 
--------------------------------------------- - 
 
¶7. (SBU) Ministry of Domestic Trade and Consumer Affairs 
Secretary General Zain told Weisel that Malaysia had already 
done a lot of work towards the goals of the original 
U.S.-Malaysia FTA.  He said that the new competition policy 
law would likely be tabled in the parliament "early next 
year."  Government-linked companies would not be exempted 
under the new law and the "competition commission" 
established by the law would be independent, with limited 
Ministry oversight.   Reviewing Malaysia's progress in IPR 
reforms, Zain said that Malaysia was in the process of 
amending several acts, referring to the camcording law, and 
possible changes to the data exclusivity in pharmaceutical 
and medical product approval process.  He said that Malaysia 
would meet the standards that the U.S. had been seeking in 
our bilateral FTA by the end of 2010. 
 
Government Procurement 
---------------------- 
 
¶8. (SBU) Commenting on possible liberalization of government 
procurement, Zain noted that the domestic policy process for 
consideration of changes is proceeding, but of all the areas 
of economic policy reform, it was the most politically 
sensitive and "would not be an easy task." 
 
Domestic Politics 
----------------- 
 
¶9. (C) The broader domestic context is more settled than a 
year ago, but worrisome factors are still embedded in the 
system.  Najib came to power as Prime Minister in April 2009 
in the midst of domestic political discord that raises 
long-term questions regarding the continued dominance of his 
ruling UMNO party, in power since independence in 1957.  He 
replaced former PM Abdullah Badawi, who was eased out after 
the ruling National Front (BN) coalition lost its 
near-perpetual two-thirds majority control of Parliament--and 
five of 13 states--in the March 2008 general elections. Najib 
successfully presided over the October 2009 UMNO national 
convention, which bolstered his leadership, but is finding it 
challenging to identify and implement popular political 
reform measures while maintaining UMNO's tight control over 
state levers of power and patronage.  Opposition leader Anwar 
Ibrahim remains at risk of imprisonment over what most 
observers would agree are politicized charges of sodomy; his 
trial begins on February 2.  Malaysia has a long record of 
religious tolerance, but non-Muslims are concerned about what 
they see as creeping Islamization of Malaysian society.  A 
 
KUALA LUMP 00000061  003 OF 003 
 
 
contentious issue in January was whether non-Muslim 
Malay-language religious publications could use the word 
"Allah" to refer to God, which has lead to widespread public 
discord and, from January 8-11, arson attacks on at least 
twelve Christian churches in five different states.  The 
government recently made three sets of arrests in connection 
with the attacks. 
 
Foreign Policy:  UN, Middle East/Iran, and ASEAN 
--------------------------------------------- --- 
 
¶10. (C) Malaysia's foreign policy is not well aligned with 
that of the United States.  Instead, it is Non-Aligned 
Movement (NAM)-centric which leads Malaysia to vote opposite 
the U.S. position on almost all important UN issues. Malaysia 
claims to enforce the letter of UNSCR resolutions, but it has 
not entered into the spirit of putting pressure on Iran to 
relinquish its nuclear weapons development programs. U.S. 
support for Malaysia joining the Somalia anti-piracy Contact 
Group was a useful start to moving Malaysia toward more 
engagement in multilateral security structures. Malaysia is a 
leading member of ASEAN, and could play a more positive role 
in Southeast Asian conflict resolution and ASEAN's approach 
to Burma to bring about democratic change in that country. 
The one foreign policy issue that resonates most profoundly 
with the Malaysian public is the Israel-Palestine conflict, 
where predominantly Muslim Malaysians (55 percent of the 
population) identify with the Palestinians and criticize U.S. 
support of Israel. 
 
Non-proliferation and Export Control Law 
---------------------------------------- 
 
¶11. (C) The GOM supports the Non-Proliferation Treaty (NPT) 
regime, with emphasis on the need for all countries to 
denuclearize. Malaysia claims to enforce the letter of UNSCR 
resolutions, but it has not entered into the spirit of 
putting pressure on Iran to relinquish its nuclear weapons 
development programs, perhaps primarily due to the widespread 
public perception here that Iran's denial of a weapons 
program can be taken at face value.  We remain concerned that 
Malaysia remains a key transit point for proliferation 
activities.  Equally of concern has been the lack of momentum 
in passage of an export control law, which is critical for 
Malaysia to be able to take the kind of actions we want to 
stem growth in transshipments of sensitive technologies to UN 
proscribed entities.  Most recently, we are paying close 
attention to the recent disclosure that two F-5 jet engines 
have disappeared.  The disappearance of the engines, whose 
use and distribution is regulated by an agreement between the 
U.S. and Malaysia, could be a simple case of graft, but we 
cannot discount the possibility that they were smuggled to a 
third country like Iran.  The GOM is investigating and has 
indicted two individuals. 
 
KEITH